All stock options are American options and they can be sold or exercised anytime. Intrinsic Value of an option is the difference between the spot price and strike price of the underlying i. Time Value of an option is the difference between its premium and its intrinsic value i. Usually, the maximum time value exists when option is ATM. In-the-Money Option: An ITM option is an option that would lead to positive cash flow to the holder, if it were exercised immediately.

At the money option: An ATM is an option that would lead to zero cash flow if it were exercised immediately i. Out-of-the Money: An OTM is an option that would lead to a negative cash flow if it were exercised immediately.

The change in option price when a particular price determinants changes, is expressed as Option Greek. Some of important option Greek is as given below:. Delta: It is the rate of change of option price i. Delta of long call option and short put is always positive and ranges between 0 and 1 and long put and short call is always negative and ranges between 0 and Vega: It measures the rate of change of option value to volatility of price of the underlying asset. It is always positive for long options and negative for short options.

Theta: It measures the change in the value of option with respect to passage of time. All other things remaining the same, the option would lose value with passage of time. Rho: It measures sensitivity of option value to the risk free rate. We serve cookies on this site to analyze traffic, remember your preferences, and optimize your experience. Karvy is a diversified financial services and IT solutions provider with a large footprint across India, providing employment to thousands of people in practically all states in the country, and has a proven 40 year record of integrity and a reputation for excellence in the financial markets.

A number of articles have surfaced in the media about Karvy in the last twenty four hours. Welcome Log Out. Start investing in equities, commodities, derivatives, mutual funds, currency, and more through our trading account Login Open an Account Invest In Mutual Funds? Login Register Now. Insights Daily-English Weekly-English. Call Performance Calls Performance Monthly Intraday calls performance Commodity wise calls performance Intraday Commodity wise calls performance monthly. Intermediate Saving vs Investment Portfolio Management. Advanced Mutual Funds Technical Analysis.

News Market Commentary Corporate Announcement other news. Karvy Financial Academy. Beginner Intermediate Advanced. The various ways of raising funds include: Intial Public Offer IPO under it, funds are raised from the public for the very first time by sharing the ownership. The two routes are: Offer for Sale OFS and Institutional Placement Programmes IPPs —allow all companies to reduce the promoter stake through an auction of shares on stock exchanges during normal hours to comply with minimum public holding norms.

Since the OFS and IPP routes allow promoters to sell shares on the bourses with faster regulatory clearances, without much paperwork or the need for road shows, they help companies raise capital faster than other methods, thereby curbing volatility risks Authorized Capital is the amount of capital with which a company is registered with the registrar. Transactions in Cash: In a transaction, buying and selling of the same securities take place on same settlement cycle.

Transaction in Futures: A futures contract gives the right to buy or sell a given amount of underlying at specified price and on or before specified date. Features of Futures Trading: Initial margin amount of contract value is required for taking positions which is determined by exchange on the basis of SPAN plus exposure margin. Positions need to be squared off by last trading day of the contract failing which exchange will square off those positions. Transactions in Option: An option is a contract between two parties to buy or sell a given amount of underlying assets at pre-specified price on or before a given date.

Features of Option Trading: Buying of option requires premium to be paid and selling of option requires margin to be paid.

Futures and Options (F&O) - Definition and Types of Futures and Options

The price which option buyer pays to option seller to acquire the right is called an option price or option premium. The pre-specified price is called as strike price and the date at which strike price is applicable is called expiration date.

The asset which is bought or sold is called underlying assets. Style of Options: American Options can be exercised any time on or before the expiration date. Option Value Intrinsic Value of an option is the difference between the spot price and strike price of the underlying i. Option Greeks: The change in option price when a particular price determinants changes, is expressed as Option Greek.

Some of important option Greek is as given below: Delta: It is the rate of change of option price i. Option Strategies: 1. Latest Blog The trusted way to pick the best stocks to buy for long-term. Login Forgot password. For any query call us on To Download Nest Trader Application click here.

More details OK. Not able to view chat? Please Click Here. X Comprehensive rejoinder on media reports concerning SEBI Karvy is a diversified financial services and IT solutions provider with a large footprint across India, providing employment to thousands of people in practically all states in the country, and has a proven 40 year record of integrity and a reputation for excellence in the financial markets. Upon submission of the preliminary inspection report by NSE to SEBI, the regulator issued an ex-parte ad-interim order dated Nov issuing directives in investor interest.

The order itself states emphatically, that this is in response to preliminary findings and is subject to further review upon a more comprehensive audit and investigation.

Equity options definition

The order further gives us the right to respond to each and every preliminary observation within a period of 21 days and is thus only a temporary order restraining some actions till December 16th, when we will represent our position to SEBI. Even a perfunctory reading of the above mentioned order makes it clear that the only relevant strictures that have been passed against our organization are a temporary hold on the onboarding of new clients, and additional oversight and monitory from NSE and BSE. It in no way prevents us from continuing to transact business on behalf of our existing clients as per their instructions, and in furtherance of investor best interests.

The restriction on onboarding new clients is only for a twenty one day period subject to us submitting the clarifications and stating our position. That notion may be overstated, especially because investors can let an option expire and incur no further financial obligation other than the premium paid and associated trading costs.

For example, buying a put option will help mitigate potential losses if the value of a stock you own goes down.

Definition of 'Lot Size'

Options trading requires a more hands-on approach than investing in stocks. You can set alerts through your online broker. Also, some options strategies are riskier than others, so make sure you understand the trade in advance. Hint: Many experts recommend avoiding daily or weekly options, which tend to be a better fit for more seasoned traders.

Another downside of options trading is the related costs, which can be higher than for stocks. Finally, as with stocks, be sure to factor in capital gains taxes. Deciding whether stocks or options are better for you is entirely a personal decision, based on your investing style. Beginner investors and those who prefer simplicity generally will stick to stocks for their straightforward nature. Those who favor an active investment approach and love to watch the market may find options appealing.

After all, options traders inherently become stock investors if they exercise call options. Meanwhile, many stock traders use put options as a hedging mechanism. Many or all of the products featured here are from our partners who compensate us.

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